Which of the following is an example of a behavior-oriented contract?
A)Stock option
B)Profit sharing
C)Commission
D)Merit pay
E)Revenue sharing

Question

Quizplus · Accepted Answer

Agency theory says that the principal must choose a contracting scheme that helps align the interests of the agent with the principal's own interests (that is, it reduces agency costs). These contracts can be classified as either behavior-oriented (such as merit pay)or outcome-oriented (stock options, profit sharing, commissions).

Which of the Following Is an Example of a Behavior-Oriented